What's left to fix financial meltdown?

U-T EconoMeter panel weighs in on what remains to do

Trader Jonathan Corpina works on the floor of the New York Stock Exchange Wednesday, Sept. 18, 2013. The stock market hit a record high Wednesday after the Federal Reserve's surprise decision to keep its economic stimulus in place. (AP Photo/Richard Drew)
— AP

Trader Jonathan Corpina works on the floor of the New York Stock Exchange Wednesday, Sept. 18, 2013. The stock market hit a record high Wednesday after the Federal Reserve's surprise decision to keep its economic stimulus in place. (AP Photo/Richard Drew)
/ AP

Marney Cox, San Diego Association of Governments

Our capitalist system works best when there is chance for business failure or success. So, at the top of a cleanup list is eliminating too-big-to fail. Total assets at the nation’s 10 largest banks have increased 28 percent since the meltdown to $11.3 trillion, representing nearly 70 percent of GDP. Banks could be wound down or capital buffers increased to protect taxpayers from another bailout. Second, denationalize the home mortgage market. About nine of every 10 new mortgages are backed by the U.S. taxpayer. Eliminating Fannie Mae and Freddie Mac would limit the implicit federal guarantee and allow the private sector to shoulder the risk.

Yes
91% (20)

No
9% (2)

Kelly Cunningham, National University Systems

Monetary and other efforts to stimulate the economy have not corrected fiscal mismanagement causing the financial crisis. Quantitative easing, purportedly needed until the “real” economy takes over, hampers necessary reforms needed for real recovery to take place. An economy so addicted to artificial stimulus fails to restructure. Anemic growth delivered from perpetual stimulus masks the underlying economic fundamentals continuing to deteriorate. Manipulating currencies and directing capital into non-productive sectors starves areas of the economy that would lead to true rebirth. Stimulus efforts should therefore be ended and unshackle the real economic forces necessary for robust and sustainable growth to occur.

Alan Gin, University of San Diego

There is still the possibility of moral hazard, as some banks can take on excessive risk knowing they will be bailed out if they are “too big to fail.” Also, there is the problem of banks taking insured deposits and then investing the funds in risky instruments. To deal with this latter possibility, I favor the 21st Century Glass-Steagall Act, sponsored by Sens. Elizabeth Warren, John McCain, Maria Cantwell and Angus King, which would require banks with insured deposits to refrain from undertaking certain risky financial activities. It also has some elements that would lead to reduced bank sizes, thus dealing with the issue of “too big to fail” as well.

James Hamilton, University of California San Diego

Mortgage giants Fannie Mae and Freddie Mac are still in government conservatorship. They got that way after running up $1.5 trillion in debt and issuing guarantees on over $5 trillion in mortgages. Fannie and Freddie are once again making a profit, but that does not mean we should just go back to the way things were as if nothing had happened. The proper role of the government should be to regulate financial institutions rather than provide guarantees or bailouts when things go wrong. No federal or private entity should be promising that it can guarantee payment of trillions of dollars in mortgage debt.

Gary London, The London Group Realty Advisors

Our capital markets are more vulnerable to a financial crisis now. The "too big to fail" banks are bigger. Their lobbies have diluted Dodd-Frank reform -- they still trade derivatives and other sketchy assets without supervision. They whine about increased capital reserve requirements. Wall Street is a free-for-all with lots of money/influence and the federal government has opted to let them play their games. They take profits as private institutions and pass losses to taxpayers. They mostly don't even lend money to taxpayers. Start with reforming these!